Related papers: Bailouts in Financial Networks
The field of Financial Networks is a paramount example of the novel applications of Statistical Physics that have made possible by the present data revolution. As the total value of the global financial market has vastly outgrown the value…
We present a simple continuous-time model of clearing in financial networks. Financial firms are represented as "tanks" filled with fluid (money), flowing in and out. Once "pipes" connecting "tanks" are open, the system reaches the clearing…
We show that, in a resource allocation problem, the ex ante aggregate utility of players with cumulative-prospect-theoretic preferences can be increased over deterministic allocations by implementing lotteries. We formulate an optimization…
Network centrality plays an important role in many applications. Central nodes in social networks can be influential, driving opinions and spreading news or rumors.In hyperlinked environments, such as the Web, where users navigate via…
Analysis of the 2007-8 credit crisis has concentrated on issues of relaxed lending standards, and the perception of irrational behaviour by speculative investors in real estate and other assets. Asset backed securities have been extensively…
The power and communication networks are highly interdependent and form a part of the critical infrastructure of a country. Similarly, dependencies exist within the networks itself. It is essential to have a model which captures these…
As financial institutions increasingly rely on machine learning models to automate lending decisions, concerns about algorithmic fairness have risen. This paper explores the tradeoff between enforcing fairness constraints (such as…
The Fixed-Charge Network Flow problem is a well-studied NP-hard problem that has the goal of finding a flow in a network where fixed edge costs are incurred, regardless of the amount of flow hosted by the edge. In this paper, we consider…
A theoretical method is empirically illustrated in finding the best time to forsake a loan such that the overall credit loss is minimised. This is predicated by forecasting the future cash flows of a loan portfolio up to the contractual…
In this paper we introduce a capacity allocation game which models the problem of maximizing network utility from the perspective of distributed noncooperative agents. Motivated by the idea of self-managed networks, in the developed…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
Supply chains are the backbone of the global economy. Disruptions to them can be costly. Centrally managed supply chains invest in ensuring their resilience. Decentralized supply chains, however, must rely upon the self-interest of their…
Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current…
Networked public goods games model scenarios in which self-interested agents decide whether or how much to invest in an action that benefits not only themselves, but also their network neighbors. Examples include vaccination, security…
People choose friendships with people similar to themselves, i.e. they sort by resemblence. Economic studies have shown when sorting is optimal and constitute an equilibrium, however, this presumes lack of beneficial spillovers. We…
The structure of many financial networks is protected by privacy and has to be inferred from aggregate observables. Here we consider one of the most successful network reconstruction methods, producing random graphs with desired link…
Credit networks represent a way of modeling trust between entities in a network. Nodes in the network print their own currency and trust each other for a certain amount of each other's currency. This allows the network to serve as a…
The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…
Network reliability measures the probability that a target node is reachable from a source node in an uncertain graph, i.e., a graph where every edge is associated with a probability of existence. In this paper, we investigate the novel and…